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Al Abaroa - Wheat, Corn

|Includes: AllianceBernstein Holding L.P. (AB)

Foods and Fibers:  On August 3, 2010 in an interview with BNN, I discussed wheat. I mentioned that the sharp move up in price was more of a supply-shock rally rather than a demand driven move. I had mentioned that wheat may approach $8.00 and that could be the end of its move. In the 7-31-10 Wire I penned, “In my opinion, it is important that the brisk export pace continue for the bulls to maintain the upper hand. Otherwise, the 42% price increase month-over-month may have amply priced in supply-shock related risk premiums. While past performance is not necessarily indicative of future results, historically it is demand driven rallies, not supply-side shock that sustains price gains.” This very statement seems to have a greater sense of importance now than it did during the original writing. Supply shock is no doubt a concern, but focus is shifting to the demand side of the equation. This concern is not limited to just wheat but also corn and soybeans.

The Chinese corn demand has not dwindled and may even become more aggressive. Pro Farmer reports that the USDA’s initial survey of the 2010 crop was 13.365 billion bushels. Total use is pegged at 13.49 billion bushels. If indeed we get the forecasted record crop, it may still fall shy of demand. Now, if we watch the growing degree day count that fell fast upon much of the Corn Belt yields may not be as robust. This is certainly worth close attention and I would advise those that are bearish to be very careful in the months ahead.

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